Here We Go Again: Free Trade Era Dieing

After the easy credit of the Roaring Twenty’s ended ever so suddenly with the Wall Street Crash of 1929, economically illiterate politicians of every major nation turned suddenly and vehemently against Free Markets and Free Trade. A confused, scared and angry electorate eagerly pushed for the very policies that would result in a global recession and national depressions. Despite the signed protests of one thousand twenty eight economists, the first of many suicidal policies implemented was the Smoot-Hawley Tariff Act. The Federal Reserve System then followed up with a tight monetary policy, thereby landing the mortal blow to both the U.S. and global economy. Retaliation began long before the bill was enacted into law in June 1930 as one country after another moved swiftly towards autarky.

Farm animal stupid, but here we go again:

Free-Trade Era May Be Nearing End Amid Food, Growth Concerns: “After six decades of ever-expanding international commerce, the high tide of free trade is ebbing.

As tens of thousands of South Koreans protest U.S. beef imports, rising commodity prices push nations to keep more food for domestic consumption and the U.S. chooses a new president who might be less supportive of free trade than his immediate predecessors, the world may be facing the end of a cycle that began in the immediate aftermath of World War II.

The liberalization of global trade has come “to a screeching halt,” said Fred Bergsten, director of the Peterson Institute for International Economics in Washington. “It'll take years to rebuild the foundations of free-trade policy.”

The cause is more political than economic.

Fueling the backlash is a convergence of trade-related anxieties: national-security concerns, worries about food safety and sufficiency, the desire to protect local jobs and the environment. In addition, the benefits of trade are often widely dispersed -- think low prices at Wal-Mart -- and entail high adjustment costs, including the loss of manufacturing jobs.”

Now as the GLOBAL credit and real estate bubbles deflate you’ll here more talk of this nature:

“Meanwhile, Democratic presidential candidate Barack Obama says that if elected, he might reopen the world's largest trade deal, the North American Free Trade Agreement with Canada and Mexico.”

Since Barack Obama is a clever fellow, this is probably nothing but a vote grab for him… and something he won’t actually follow up on.

BUT when the masses rage, anything is possible…

“Nowhere is that more evident than in South Korea, where public anger related to a pact aimed at increasing trade with the U.S. by 20 percent is shaking the government of President Lee Myung Bak. Lee has seen his popularity plunge from 50 percent when he took office in February to 17.1 percent in a poll this month by Korea Research and the YTN cable news network; his cabinet this week offered to resign over the dispute.

On June 10, about 80,000 South Koreans flooded the streets of Seoul to protest a proposal to resume beef imports from the U.S. Korea must remove the five-year-old ban, which was designed to prevent the possible spread of mad-cow disease, before the U.S. Congress will consider approving the trade agreement, Senate Finance Committee Chairman Max Baucus of Montana said June 11.”

… anything is possible because votes are a politician’s kryptonite and the masses have a nasty habit of voting themselves straight into poverty.

What do you think will happen to emerging market economies and all those beautiful ETF’s should a couple of trade wars erupt? From Brazil, India, and China to Russia risky assets such as equities will get positively crushed…

When the going gets tough, the guy with the most outrageous ideas seems to get the most attention… and votes.

Housing prices going down? Don’t worry about it. Bail out the clowns that bought them, forgive the loans and freeze house prices.

Inflation pushing up prices? Freeze prices. Make inflation illegal.

Commodities going up? Blame speculators and tax the producers so they don’t go looking for more commodities… oh and, subsidize consumers so that supply and demand signals REALLY get messed up.

If that doesn’t work… find a scapegoat and go immediately to war.